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Ceteris
Paribus
This
nifty Latin saying means Òother things being equal,Ó
and leads me to want to talk about how some people
make a fundamental mistake while shopping for
a mortgage.
They
assume that all aspects of getting a loan, itÕs
characteristics, the service during the process,
and so forth, are the same regardless of which
lender is chosen. Ê With that assumption firmly
in place, they proceed to shop for their mortgage
on the basis of the price quoted to them.
Now
that method is certainly valid for many of our
shopping needs. In almost every area of consumer
merchandizing, whether you are buying a shirt,
laundry detergent, or a digital camera. Even if
you narrow down a price range you are faced with
a myriad of choices of products with very similar
characteristics. Ê ItÕs hard to make buying decisions.
The
problem is that we have all bought things on price
and then found out that what we got wasnÕt quite
what we wanted. Ê Ever buy a knife or tool that
broke soon after you bought it? Ê Ever buy an
Òoff-brandÓ package of macaroni and cheese? Ê
If your experience is like mine, youÕll go back
to the national brand rather than save ten cents.
Ê Everyone I know who has bought a $100 digital
camera now wishes that he had put that $100 toward
a better camera. Ê They go buy the one they should
have bought in the first place and the $100 one
sits in a drawer.
The
plain fact of the matter is that with most of
the things we buy, we ultimately figure out that
the differences in quality, service, and convenience
are more important than the relatively minor differences
in price. Ê I buy my clothes at Nordstrom and
I buy groceries from the store closest to my home.
IÕll be you do too.
People
ought to do the same thing with their mortgage
too, but they have little familiarity with the
process. There no question in my mind that it
is a lot easier to trivialize the process, make
the Òceteris paribusÓ assumption, and then call
a bunch of lenders to get quotes, and, frankly,
do a lot of ÒhopingÓ that everything turns out
OK.
WhatÕs
wrong with this? All too frequently, I find that
people also do not spend any time figuring out
their goals, so they just start shopping before
figuring out what they should be shopping for.
Ê They end up with the wrong loan. Also, bluntly
speaking, there is some math involved in making
some of the decisions and the average homeowner
just does not have the proper tools at his/her
fingertips. Ê Finally, it is awfully easy to be
trapped by the lenders into doing something that
improves their profitability, like choosing a
no-point loan.
A
better way is to shop for a loan by shopping for
a expert, a knowledgeable, trustworthy, caring
person who can help educate you about the choices
you need to make. Ê Most people need help in establishing
their goals. They intuitively make the wrong choice
because they do not know about alternatives and
are not sure how to figure out the differences
between various programs. Finally, they typically
do not lock in at the optimum time.
IÕll
define an expert as someone in the top 10% of
the profession. Ê Those people are successful
at their job because they are really good at helping
people make those decisions. To find one in your
area, talk to friends to get referrals. Ê Use
the Internet to find a mortgage broker in your
state, even if itÕs not in your town. Check out
Upfront Mortgage Brokers at www.mtgprofessor.com.
When you narrow down your choices, get references
and check them out. Ê ItÕs a little more work
to do it this way, but I guarantee it will save
you enough money to be well worth the effort.
Be
careful out there.
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